1. Understanding Limited Companies
A limited company is a business structure where the company is a separate legal entity from its owners. It offers limited liability protection, meaning shareholders are not personally responsible for company debts beyond their investment.
2. Main Legal Obligations of Most Limited Companies in the UK
a. Register with Companies House
- All limited companies must be registered before trading.
- You must provide company name, address, director details, and share structure.
b. File Annual Accounts
- Submit a yearly financial statement to Companies House showing your company’s performance.
c. Submit a Confirmation Statement
- Previously called an “Annual Return.”
- Confirms your company’s registered details are up to date.
d. Pay Corporation Tax
- Register with HMRC for corporation tax within 3 months of starting trading.
- File a company tax return (CT600) annually.
e. Keep Statutory Records
- Maintain records of directors, shareholders, and company resolutions.
- Record any share transactions and changes to company structure.
f. Maintain Proper Accounting Records
- Track income, expenses, assets, and liabilities.
- Keep records for at least 6 years.
g. Follow Directors’ Duties
Under the Companies Act 2006, directors must:
- Act within their powers.
- Promote the success of the company.
- Exercise independent judgment.
- Avoid conflicts of interest.
h. Report Changes to Companies House
- Update changes to directors, registered office, or share structure within set timeframes.
i. Comply with Employment Laws (if hiring staff)
- Pay at least the National Minimum Wage.
- Provide statutory benefits and workplace pensions.
- Follow health and safety regulations.
j. Meet VAT Obligations (if applicable)
- Register for VAT if your turnover exceeds the threshold (£90,000 as of 2024).
- Submit VAT returns and payments on time.
3. Penalties for Non-Compliance
Failure to meet these obligations can result in:
- Late filing penalties.
- Fines from HMRC or Companies House.
- Being struck off the register.
- Disqualification of directors.
Frequently Asked Questions
Q1: Do all limited companies need an accountant?
Not legally, but most hire one to ensure compliance.
Q2: What happens if a limited company doesn’t file annual accounts?
You’ll face late filing penalties and risk being removed from the Companies House register.
Q3: Is corporation tax the same for all companies?
No, rates can vary depending on profits and marginal relief rules.
Q4: Can a limited company operate with one person?
Yes, you can be the sole director and shareholder.
Q5: Do limited companies need insurance?
Employers’ liability insurance is mandatory if you employ staff; other types depend on your business activities.
Q6: How often should a limited company file with Companies House?
Annual accounts and a confirmation statement must be filed once a year.
Conclusion
The legal obligation of most limited companies in the UK involves registering with Companies House, filing accounts and returns, paying corporation tax, keeping accurate records, and following directors’ duties. Staying compliant avoids penalties and helps maintain a strong business reputation.